You can figure that the annual property tax base will be 1.11% of the sale price of the property. When you add in the other assessments (County library, flood control, etc.) it usually amounts to somewhere around 1.20% +/- of the sale price of the property. If you are interested in purchasing a home, be sure that your Realtor requests the Tax Disclosure Report for that home.
However, if it is a new development and has Mello Roos, it could increase substantially. Check with the builder about that rate.
The biggest closing cost difference is when you buy in San Jose, Mountain View or Palo Alto there is an additional $3.30 per $1000 transfer tax fee that is split 50/50 between buyer and seller.
Proposition 13 uses acquisition value (usually what the owner paid for the home) rather than the current market value as a basis of taxation, it is possible for owners of identical side-by-side properties to have significantly different tax bills. Those who have owned their property longer, often see that the current market value is much greater than the taxable value, which is limited to a 2% annual increase under Proposition 13.
This cap on increases protects all owners from being taxed on "paper profits," the higher market value of a home from which the owner receives no benefit. Many homeowners who bought their property just ten years ago could not afford to buy their own homes at today's prices!
The difference between actual value and taxable value disappears when the property changes hands. New buyers are taxed based on what they voluntarily agree to pay for their property. The real fairness in Proposition 13 is in how it works once a home is purchased. It controls taxes on all property by restricting the maximum rate (1%) and by limiting annual increases in assessed valuation (2% annually).
If you need assistance in the Morgan Hill area please feel free to contact me and my team and I would be happy to provide information, walk you through the process or field any questions you may have.
Keep in mind, Prop 13 was STATEWIDE, not just for our county, so it applies to ALL of California.
How Proposition 13 Works
Frequently new homeowners will ask why they are paying twice as much (or far more) in property taxes than their neighbor. The answer is Proposition 13. Passed by the voters in June, 1978, Proposition 13 is an amendment to the California Constitution that limits the assessment and taxation of property in California. It restricts both the tax rate and the rate of increase allowed in assessing real property as follows:
To read the full artible, click on the link below:
The property tax cannot exceed 1 % of a property's taxable value, plus bonds approved by the voters, service fees, improvement bonds, and special assessments.
Always use an Independent Broker ! ! !
In June, 1978 the voters passed Proposition 13, which sets the value at the 1% starting point (A home valued at $500,000 would be billed at ($5,000/year--plus some supplementary add ons). Now, under Prop 13 the most they could assess your home at the next year (and subsequent years) would be 2% higher on the value ($510,000) so you would pay ($5100/yr.). Year following that $520,020, although your house may have gone up in market value by $50,000 (or down, in which case you can petition the assessor and try to get your assessment down).
You can find more information here: http://www.sccassessor.org/portal/site/asr/
Furthermore, if you live in the home, you get a homeowner's exemption of $7,000 off the assessment, or roughly $5.83/mo. Big deal,eh? That figure has not changed since I started in this industry 22 years ago, when the median price of a home in CA was $133,640. A disabled Vet however gets a $100,000 exemption.
We enjoy a low property tax rate at 1%. Other states have it 3%, or even higher. Just thought I'd mention that as I just heard of a woman who purchased in TX who was from CA and she thought it was 1%. Big surprise. My home in AZ is taxed at a 3% rate, and commercial properties there are taxed at 8% (I think, I don't own commercial property there).
Remember also that property taxes are tax deductible on your income tax, if you itemize, which you should probably do if you start paying a home loan, which helps take a little of the sting out of it.
Example: If you buy a property for $500,000, and deduct the approx. $5,000 you paid in property taxes against your income, and your income tax rate is 25%, you would essentially be paying the IRS $1,250 less in Income Tax. Not earth shattering, but it helps keep the money local...